As Beijing promotes “commonwealth” and political turmoil threatens Hong Kong, Singapore has become a safe haven for some of the region’s wealthiest tycoons and their families.
Wei Liet Tay | Bloomberg | beautiful pictures
An increasing number of wealthy Chinese are worried about keeping their money on the mainland, and some see Singapore as a safe haven.
Are from Protests disrupted Hong Kong’s economy in 2019, Wealthy Chinese have been looking for alternative places to store their wealth. Singapore is attractive because of its large Mandarin-speaking population, and unlike many countries, it does not impose a property tax.
This trend appeared to start last year after Beijing suddenly cracked down on the education industry and emphasized “common prosperity” – wealth that is moderate for all, rather than just a few.
That’s according to CNBC interviews with companies in Singapore that are helping China’s wealthy move their wealth back to the city through family office structures.
A family office is a private company that undertakes investment and asset management for a wealthy family. In Singapore, setting up a family office usually requires assets of at least $5 million.
In the past 12 months, requests to set up a family office in Singapore have doubled at Jenga, a five-year-old corporate and accounting services firm, according to founder Iris Xu. She said the majority of requests came from people in China or people who migrated from within.
[Wealthy Chinese] believe that there are many opportunities to make money in China, but they are not sure if it is safe for them to deposit there.
About 50 of her clients have opened family offices in Singapore – each with assets of at least $10 million, Xu said.
China’s rapid economic growth has created hundreds of billionaires in just a few decades. Hundreds of others joined their ranks last year, according to Forbes.
The data shows that this brings the total number of billionaires in China to 626, second only to 724 billionaires in the United States.
However, mainland China’s tight capital controls – the official limit of $50,000 a year in foreign exchange – have limited the billionaires’ investment and wealth preservation options.
Xu said her Chinese clients “believe there is a lot of opportunity to make money in China, but they’re not sure if it’s safe for them to send money there,” according to a CNBC translation of the call. Interview in Mandarin.
Concerns about ‘common prosperity’
Ryan Lin, director of Bayfront Law in Singapore, said new work related to the family office is disproportionately reaching Chinese clients. His company also has customers from India, Indonesia and parts of Europe.
While the capital controls mean more Chinese clients are opening family offices with smaller capital, Lin said most of the revenue-generating businesses are owned outside of the mainland.
Family office as a way to immigrate
Xu said restrictions related to international travel have also fueled the interest of China’s wealthy in setting up family offices in Singapore. The country has a global investor program that allows adults to invest at least S$2.5 million ($1.8 million) to apply for permanent residency.
Since the start of the pandemic, some Chinese nationals have noticed that the Chinese government may suspend passport renewal and issuance services under the pretext of virus control.
To answer an online question in August about the suspension of passports, China’s National Immigration Administration said it would only issue such documents to people who have a necessary or urgent reason to leave the country.
The family office boom in Singapore
Many billionaires worldwide have used family offices to manage their wealth. Another attraction of Singapore is its location which gives investors proximity to other investment opportunities in Asia.
Since late 2020, Bridgewater founder Ray Dalio and Google co-founder Sergey Brin have opened family offices in Singapore to take advantage of the country’s tax-friendly policy, as reported by Bloomberg.
How long can it last?
The ongoing war between Russia and Ukraine has brought instability to Chinese nationals who want to open family offices in Singapore.
China says it opposes the sanctions. Beijing also refuses to call Russia’s attack on Ukraine an invasion, and state media often blame the US for the conflict.
Contrary to China’s attempt to take a neutral stance on the war, Singapore joins the US and EU in imposing sanctions on Russia earlier this month, reportedly froze local bank accounts held by sanctioned Russian individuals and entities.
Jenga Xu said news of the asset freeze had prompted some potential Chinese clients to halt plans to open a family office in Singapore.
